The transfer of property titles among family members is a legal process that passes the ownership from one individual to another. Such a process is done due to reasons like gifting, inheritance, or planning for finance. The relatives follow the codes and property laws to make the process continue smoothly without any legal action.
Whether the transfer is through a gift deed, will, or family settlement, documents like the Encumbrance Certificate, identity proofs, and legal title papers must be verified. In some cases, such transfers can also help resolve existing ownership disputes within the family. Although the people involved are related, the process, including documentation, stamp duty (in many states), and registration, remains essential. Learn more about property title transfer in the content below.
Types of Property Title Transfers
1. Gift Deed: A gift deed is a document that shows the transfer of property among family members without any payment involved. Property transfer through gift deeds happens out of love and care. Families often choose gift deeds to hand over property.
2. Inheritance Deed: Property ownership transfer after death is typically handled through an inheritance deed. This may be based on a will. If no will exists, inheritance laws decide the transfer.
3. Relinquishment Deed: If a co-owner of a property wishes to transfer their share to another co-owner, this is known as a relinquishment deed. Such deeds are often used in the transfer of inherited property to bring ownership under one name.
4. Sale Deed: A property can also be transferred to a family member via a sale deed, with or without actual monetary exchange. Even if sold for a token amount, it is treated as a sale, and full stamp duty and capital gains tax (if applicable) may be levied.
5. Partition Deed: A partition deed is used to divide a joint family or co-owned property among members, establishing clear ownership. This ensures smooth division of assets without dispute. The deed must be registered and may attract nominal stamp duty within the family.
6. Exchange Deed: An exchange deed is used when two family members agree to swap their respective properties. It involves mutual consent and is legally binding. Even if no money is exchanged, it is treated like a sale for stamp duty purposes and must be registered. The applicable stamp duty is usually calculated based on the higher-valued property being exchanged.
Essential Documents Required for Property Title Transfer
- Sale Deed/Land Title Deed: This is the primary legal document that establishes ownership. It is mandatory during a title transfer and must be registered with the sub-registrar..
- Encumbrance Certificate: It tells us if there are any judicial liabilities outstanding against the property and encumbrances like mortgages.
- Property Tax Receipts: The receipt ensures that all the taxes have been paid and nothing is left pending for property tax.
- Identity Proof: It can be established through an Aadhaar card, passport, or government ID of both the buyer and seller.
- Address Proof: Documents such as utility bills, Aadhaar card, passport, or ration card that validate the current address of both buyer and seller. In some cases, a notarized rent agreement may be accepted with supporting documents.
Legal Process to Transfer Property Title
In India, eight legal procedures are required to change the ownership of property, beginning with verification of documents and ending with updating the land records. They are as follows:
Step 1: Background Inspection
Verify the ownership of the property, confirm there are no encumbrances, and ensure the title is clear by checking documents on land records and past deeds. It confirms the owner’s legal right to transfer the property.
Step 2: Purchase Agreement
A first-time agreement with terms of sale, payment, and registration deadline that gives legal protection to the parties until the deed is actually registered.
Step 3: Preparation of the Transfer Deed
The document is prepared according to the method of transfer, sale, gift, or exchange, and contains the parties, property description, and technical terms.
Step 4: Execution of the Deed of Transfer
The transfer deed has to be signed by both the transferor and transferee, and two witnesses. It shows that both parties accepted the agreement.
Step 5: Settlement of Stamp Duty
The stamp duty is paid based on the cost of the property and as per state laws. This is a crucial step towards legal acceptance.
Step 6: Official Registration of the Deed
The deed is registered at the sub-registrar’s office. Registration legitimises the deed and officially documents the transfer of ownership.
Step 7: Handing Over the Premises
On registration, possession is transferred to the buyer, thereby completing the physical transfer of property.
Step 8: Land Title Mutation and Revision
A mutation reflects the municipal or land records, the new owner’s name, and establishes a clear title for future transactions.
Taxation of Property Title Transfer
Title transfer of property is taxable based on the mode of transfer and the laws of the concerned place. These taxes, like stamp duty levied by the government, must be included as part of the transaction’s cost.
Stamp Duty to Transfer Property Title
- Stamp duty is a state tax levied to make it possible to transfer property ownership.
- The stamp duty rates vary from state to state and are determined according to the value of the property, and also on the gender of the purchaser.
- The purchaser generally pays stamp duty, but can be exempted with the mutual consent of both parties.
- In addition to stamp duty, registration fees need to be paid while registering the property deed.
These are certain exceptions or concessions in case of transfer to family members or legal successors.
Challenges of Property Title Transfer
The challenges of property title transfer can affect property transactions and their value. The few challenges are illegal procedures, lack of transparency, encumbrances, registration costs, disputes, and high taxation.
- Title Defects: Errors or inaccuracies in historical documents of ownership may create uncertainty about titled ownership.
- Encumbrances: Outstanding debts, mortgages, or other legal encumbrances may restrict transfer.
- Conflicts Among Heirs or Co-owners: Disputes over the rights or shares of inheritance often lead to delays in registration.
- Forgery or Fraud: Copy documents or identity forgery can obstruct or even undo the transfer.
- Inadequate documentation: Inadequate documentation of relevant legal documents can delay the entire transfer process.
What to Consider Before Transferring Property Title?
1. Stamp Duty Obligations: The transfer of property raises stamp duty, which is typically payable by the transferee. It is levied on the market value of the property at transfer, with or without discount.
2. Capital Gains Tax (CGT) and GST: Where the vendor’s property is not their primary residence, Capital Gains Tax (CGT) will be due. This also covers investment residential properties. CGT is computed on the market value of the property at disposal. Additionally, Goods and Services Tax (GST) may apply, depending on the type of property.
3. Market Value Considerations: Selling a property to family for less doesn’t reduce stamp duty or taxes. These are set using the property’s market value. This rule keeps sales fair and stops undervaluing the asset.
Wrapping Up
Shifting property titles among relatives is a common practice often caused by inheritance, estate planning, or gift-giving. The legal documents to change property include inheritance deeds, relinquishment deeds, and gift deeds. Primarily, transferring property titles is contingent upon the submission of legal documents and obtaining excellent approvals and certifications.
It is mandatory to have proper registration, EC checking, validity, and a dispute-free process. Thus, taking advice from a professional lawyer ensures that you are complying with the laws and requirements of receivers as well as owners.
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